updated 12/27/2004 10:43:57 PM ET 2004-12-28T03:43:57

Paul Volcker, who is heading an investigation of alleged corruption in the U.N. oil-for-food program, said in an interview that most of the money illegally obtained by Saddam Hussein was from smuggling, which was known by the U.N. Security Council but not stopped.

In the interview set for broadcast Tuesday with Alhurra, the U.S. government-backed television station tailored for Arab audiences, Volcker questioned the reliability of reports that Saddam diverted amounts ranging from $1.7 billion to $21 billion from the $60 billion oil-for-food program.

The former U.S. Federal Reserve chairman said there was a lot of confusion between money from smuggling and money obtained illegally under the oil-for-food program, and he refused to give any estimates.

“The big figures that you see in the press, which are sometimes labeled oil-for-food — the big figures are smuggling, which took place before the oil-for-food program started and it continued while the oil-for-food program was in place,” he said, according to a transcript obtained Monday by The Associated Press.

The Security Council authorized the oil-for-food program to help Iraqis cope with U.N. sanctions imposed after Saddam’s 1990 invasion of Kuwait. Launched in December 1996, it allowed the former Iraqi regime to sell oil provided the money went primarily to buy humanitarian goods and pay reparations to victims of the 1991 Gulf War.

Saddam’s government decided on the goods it wanted, who should provide them, and who could buy Iraqi oil — but the Security Council committee overseeing sanctions monitored the contracts.

The Duelfer report
In a report in October, top U.S. weapons investigator Charles Duelfer said Saddam was able to “subvert” the oil-for-food program to generate an estimated $1.7 billion in revenue outside U.N. control from 1997-2003. In addition, Iraq brought in over $8 billion in illicit oil deals with Jordan, Syria, Turkey and Egypt through smuggling or illegal pumping from 1991-2003 when sanctions were in place, he said.

U.S. congressional investigators reported in November that Saddam made more than $21.3 billion in illegal revenue — over $13 billion from smuggling and about $7 billion by subverting the oil-for-food program.

“Without question, (there were) problems in the oil-for-food area,” Volcker said. “But when you look at those $10 billion figures, or $20 billion figures, most of those numbers are so-called smuggling, much of which was known and taken note of by the Security Council, but not stopped.”

Volcker refused to speculate on why the council didn’t stop the smuggling, but indicated the issue would likely be addressed in his reports. An initial report is expected in January and a final report in the summer, he said.

Volcker stressed that his inquiry is focused on “what went wrong or right inside the U.N.” in managing the oil-for-food program.

Where was the Security Council?
The investigation isn’t just focusing on whether U.N. officials may be guilty of corruption, he said, but on other issues: Did U.N. officials follow proper procedures? Was there “bad administration rather than corrupt administration?” What were the directions from the Security Council, and what was its responsibility?

But Volcker said the investigation can’t avoid the question of smuggling, including the responsibility of the five permanent veto-wielding members — the United States, Britain, France, Russia and China — and why the Security Council didn’t take action to stop smuggling.

With serious allegations against the United Nations as an institution, and congressional calls for Secretary-General Kofi Annan’s resignation over the oil-for-food allegations, Volcker said an investigation is needed “to clear the air.”

“And if there were mistakes made, that ought to be revealed. If there was corruption, malfeasance, that ought to be revealed. And my hope is that will strengthen in the end confidence in the institution because it will have to reform,” he said.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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